Prime Minister Narendra Modi
Prime Minister Narendra Modi
Photo Credit: ANI

Despite the challenges posed by the COVID-19 pandemic and in the backdrop of a financial crunch seen across the world, states in India were able to borrow significantly more in 2020-21 and were able to raise an extra Rs 1.06 lakh crores in the period 2020-21. This, significant increase in availability of resources Prime Minister Narendra Modi said was made possible by an approach of 'Centre-State bhagidari'.

The Covid-19 pandemic has come with whole new set of challenges to Governments across the world in terms of policy-making. India is no exception. Raising enough resources for public welfare while ensuring sustainability is proving to be one of the biggest challenges, Modi said on Tuesday in a blog post titled "Reforms by conviction and incentives."

He stated that while formulating the country's economic response to the Covid-19 pandemic, the central government wanted to ensure that our solutions do not follow a 'one size fits all' model."


"For a federal country of continental dimensions, finding policy instruments at the national level to promote reforms by State Governments is indeed challenging. But, we had faith in the robustness of our federal polity and we moved ahead in the spirit of Centre-State bhagidari, read PM Modi's blog.

*He stated that in May 2020, as part of the Aatmanirbhar Bharat package, the Government of India announced that State Governments would be allowed enhanced borrowing for 2020-21. An extra 2 per cent of GSDP was allowed, of which 1 per cent was made conditional on the implementation of certain economic reforms.

*He further said that this nudge for reform is rare in Indian public finance, adding that this was a nudge, incentivising the states to adopt progressive policies to avail additional funds. The results of this exercise are not only encouraging but also run contrary to the notion that there are limited takers for sound economic policies, said PM Modi.

*He stated in his blog that the four reforms to which additional borrowings were linked (with 0.25% of GDP tied to each one) had two characteristics. Firstly, each of the reforms was linked to improving the Ease of Living to the public and particularly the poor, the vulnerable, and the middle class. Secondly, they also promoted fiscal sustainability, he said.

*He mentioned that the first reform under the 'One Nation One Ration Card' policy required State Governments to ensure that all ration cards in the State under the National Food Security Act (NFSA) were seeded with the Aadhaar number of all family members and that all Fair Price Shops had Electronic Point of Sale devices.

*The main benefit from this is that migrant workers can draw their food ration from anywhere in the country, said PM Modi adding that apart from these benefits to citizens, there is the financial benefit from the elimination of bogus cards and duplicate members. 17 states completed this reform and were granted additional borrowings amounting to Rs 37,600 crores, PM Modi said in his blog.

I am thankful to all the states who took the lead in ushering in these policies amidst tough times for the betterment of their citizens. We shall continue working together for the rapid progress of 130 crore Indians," read the concluding lines of PM Modi's blog.

Visit for full blog

(To receive our E-paper on whatsapp daily, please click here. We permit sharing of the paper's PDF on WhatsApp and other social media platforms.)

Free Press Journal